Hayford Amedji-dela Anyidoho

On January 1, 2025, several tax and legal changes will take effect in Germany. Below is a simplified summary of the most important updates:


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For Citizens

1. Higher Basic Tax Allowance

What is the basic tax allowance? It is the portion of income that is tax-free.

New amount for 2025: €12,096 (an increase of €312).


2. Higher Child Benefits and Tax Allowances

Child Benefits: Starting January 2025, parents will receive €255 per child per month (an increase of €5).

Child Tax Allowance:

Per parent, the allowance increases by €30 to €3,336.

Together with the care and education allowance, this amounts to €9,600 per child.



3. Increase in Solidarity Surcharge Threshold

The exemption threshold increases to €39,900 (previously €36,260). This means fewer people will pay the solidarity surcharge.


4. Childcare Expenses

What’s new? Parents can deduct 80% of childcare costs, up to €4,800 per child (previously €4,000).


5. Tax-Free Photovoltaic Systems

Systems up to 30 kW (peak) per residential unit are tax-free. This applies to systems installed after December 31, 2024.



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For Businesses

1. Electronic Invoices (E-Invoices)

Starting 2025: Businesses must issue and be able to receive e-invoices. Transitional periods apply until the end of 2026.


2. Small Business Regulation

Starting in 2025, this regulation will also apply to small businesses from other EU countries, ensuring fair competition.



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For Reducing Bureaucracy

1. Shorter Retention Periods

Accounting records must only be kept for 8 years (instead of 10 years).


2. Simplified Processes for Tax Advisors

A central database will allow tax advisors to access client authorizations more easily.



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For Health

1. Bonuses for Healthy Behavior

Health insurance bonuses up to €150 per year remain tax-free.


2. Tobacco Tax

Taxes on cigarettes, fine-cut tobacco, and hookah tobacco will increase. For example, the tax on a single cigarette will be at least 24.163 cents.



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Other Changes

1. Inheritance Tax

The flat-rate allowance for funeral expenses increases from €10,300 to €15,000.


2. Beer Tax

Homebrewers can brew up to 5 hectoliters of beer tax-free (previously: 2 hectoliters).


3. Property Tax

Starting in 2025, property taxes will be calculated based on reformed rules. Some federal states have introduced their own models.